The Federal Court has decided that Google is not been guilty of false advertising. knocking back the Australian Competition and Consumer Commission's case.

Google is off the hook.

The Federal Court has issued a judgement in which it says the Internet giant was not engaged in false advertising when it allowed its customers to target ads using competitor's names.

The dispute arose after the Trading Post bought Google ads that appeared when people searched for "Kloster Ford", a Newcastle Ford dealer.

The search produced organic results including Kloster Ford's site, but also produced ads with the dealer's name that linked to the Trading Post's website. That site contained no information about Kloster Ford.

The Australian Competition and Consumer Commission (ACCC) didn't like that practice and tried to get Google to stop allowing it, arguing that while it was advertisers that ordered the potentially misleading ads, Google made it all possible.

The Federal Court didn't buy that argument and laid the blame at the feet of Trading Post, which copped $28,00 in costs.

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Google, however, has backed down a little. The Internet giant used to label its ads as "sponsored links" and the ACCC worried that this implied some connection between either Google or the company being searched for and the content of ads. Google has since changed the label it applies, and "Ads" now appears where "Sponsored Links" used to, which makes things a bit clearer. It has also prohibited advertisers from using any other business name in their ads.

The ACCC is nonetheless claiming the case sets a useful precedent.

“This case is important in relation to clarifying advertising practices in the internet age,” ACCC Chairman Rod Sims said in a press release issued today.“All businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers.”